CASE DIGEST: Yu v. CA (G.R. No. 86683)

CASE DIGEST: [ G.R. No. 86683, January 21, 1993 ] PHILIP S. YU, PETITIONER, VS. THE HONORABLE COURT OF APPEALS, THE HONORABLE PRESIDING JUDGE, RTC OF MANILA, BRANCH XXXIV (34) AND UNISIA MERCHANDISING CO., INC., RESPONDENTS. FACTS: Petitioner, the exclusive distributor of the House of Mayfair wallcovering products in the Philippines, cried foul when his former dealer of the same goods, herein private respondent, purchased the merchandise from the House of Mayfair in England thru FNF Trading in West Germany and sold said merchandise in the Philippines. Both the court of origin and the appellate court rejected petitioner’s thesis that private respondent was engaged in a sinister form of unfair competition within the context of Art. 28 of the Civil Code.

In the suit for injunction which petitioner filed before the RTC of the National Capital Region stationed in Manila, petitioner pressed the idea that he was practically by-passed and, that private respondent acted in concert with the FNF Trading in misleading Mayfair into believing that the goods ordered by the trading firm were intended for shipment to Nigeria although they were actually shipped to and sold in the Philippines. Private respondent professed ignorance of the exclusive contract in favor of petitioner and asserted that petitioner’s understanding with Mayfair is binding only between the parties thereto.

ISSUE: Is there unfair competition?

HELD: The right to perform an exclusive distributorship agreement and to reap the profits resulting from such performance are proprietary rights which a party may protect and which may otherwise not be diminished, nay, rendered illusory by the expedient act of utilizing or interposing a person or firm to obtain goods from the supplier to defeat the very purpose for which the exclusive distributorship was conceptualized, at the expense of the sole authorized distributor.

Another circumstance which respondent court overlooked was petitioner's suggestion, which was not disputed by herein private respondent in its comment, that the House of Mayfair in England was duped into believing that the goods ordered through the FNF Trading were to be shipped to Nigeria only, but the goods were actually sent to and sold in the Philip­pines. A ploy of this character is akin to the scenario of a third person who induces a party to renege on or violate his undertaking under a contract, thereby entitling the other contracting party to relief therefrom (Article 1314, New Civil Code). The breach caused by private respondent was even aggravated by the consequent diversion of trade from the business of petitioner to that of private respondent caused by the latter's species of unfair competition as demonstrated no less by the sales effected inspite of this Court's restraining order.